Ariz. Admin. Code § 20-4-207

Current through Register Vol. 30, No. 25, June 21, 2024

Section R20-4-207 - Capital Obligations

A. An applicant for a Director's order of approval to issue a capital obligation shall submit the following documents to the Director and shall not issue any capital obligation before the Director issues the order of approval. The required documents are:

1. A certified copy of the resolution adopted by the Board of Directors, or a certified copy of the unanimous written consent of the Board of Directors, authorizing the sale of the capital obligation;

2. A copy of the agreement underlying the capital obligation;

3. A copy of the note or debenture intended to represent the capital obligation; and

4. A copy of the prospectus, if any, proposed for use in the sale of the capital obligation.

B. Each document evidencing a capital obligation shall:

1. Bear on its face, in bold face type, the following: This obligation is not a deposit and is not insured by the Federal Deposit Insurance Corporation.

2. Have a maturity provision that either:

a. Gives the obligation a maturity of at least five years, or

b. In the case of an obligation or issue that provides for scheduled repayments of principal, gives an average maturity of at least five years. The restriction on maturity stated in this subsection does not apply to any obligation that otherwise meets all the requirements of this rule if the Director determines that exigent circumstances require the issuance of the obligation without regard to any restriction on maturity. The provisions of this subsection do not apply to mandatory convertible debt obligations or issues.

3. State expressly on its face that the obligation:

a. Is subordinated and junior in right of payment to the issuing bank's obligations to its depositors and to the bank's other obligations to its general and secured creditors, and

b. Is ineligible as collateral for a loan by the issuing bank, except as provided in A.R.S. § 6-354.

4. Be unsecured.

5. State expressly on its face that the issuing bank may not retire any part of its capital obligation without the Director's prior written order of approval, and the prior written consent of the Federal Deposit Insurance Corporation.

6. Include, if the obligation is issued to a depository institution, a specific waiver of the right of offset by the lending depository institution.

7. State that, in the event of liquidation, all depositors and other creditors of the bank are to be paid in full before any payment of principal or interest is made on a capital obligation.

C. No payment shall be made under an optional right of payment reserved to the bank without the separate authorization of the Director. The Director may grant that authority in the initial order of approval or in a later order of approval.

Ariz. Admin. Code § R20-4-207

Former Rule 7. R20-4-207recodified from R4-4-207 (Supp. 95-1). Amended by final rulemaking at 7 A.A.R. 2155, effective May 4, 2001 (Supp. 01-2). Amended by final rulemaking at 29 A.A.R. 1919, effective 10/8/2023.